US-based stock fund gains fall to $740 mln amid Cyprus fears-Lipper

By Sam Forgione
NEW YORK, March 28 Investors put a net $740
million into U.S.-based stock funds in the latest week, less
than half the prior week's inflows, as worries over Cyprus's
bailout limited stock market gains, data from Thomson Reuters'
Lipper service showed on Thursday.
The demand for stock funds fell to a four-week low as
investors pulled $1.4 billion from international stock
exchange-traded funds, or ETFs, in the week ended March 27.
"There were some continuing concerns about this whole Cyprus
issue," said Lipper analyst Matthew Lemieux. "Some investors
were probably just taking profits."
Bond funds continued to be a major beneficiary of global
concerns about risk.
Taxable bond funds attracted a net $3.85 billion over the
week, though the figure is down from $5.18 billion the previous
week. Investors put $1.57 billion into investment-grade
corporate bond funds, down from $2.35 billion the prior week.
The low appetite for risk also sent investors into Treasury
ETFs, which pulled in $810 million, the most since early
November of last year. The benchmark 10-year Treasury yield fell
to 1.85 percent on March 27 on worries of a run on Cypriot bank
deposits.
Money market funds, which are low-risk vehicles that invest
in short-term securities, pulled in $888.7 million, a reversal
from the prior week's outflows of $25.54 billion.
Funds that hold corporate loans - which offer floating rates
as a hedge against rising interest rates - attracted $1.26
billion, down from the prior week's record-high inflows of $1.55
billion but still robust.
Riskier high-yield "junk" bond funds pulled in just $34.1
million, down from $200.9 million the previous week.
Mutual funds that hold stocks of companies outside of the
United States took in $1.63 billion, overshadowing demand for
U.S. stock mutual funds, which gained just $640.4 million. That
amount was the least in six weeks.
Despite the strong demand for mutual funds that hold
international stocks, investors pulled $1.4 billion out of ETFs
that hold those stocks, accounting for much of the $1.53 billion
in overall outflows from stock ETFs over the week.
Among those ETF outflows, investors pulled $1.6 billion from
iShares: MSCI Emerging Market ETF. The SPDR S&P 500 ETF
Trust, meanwhile, bled $3.03 billion.
The outflows from the S&P index fund were largely offset by
inflows into other U.S. ETFs, including $2.33 billion in new
commitments to the iShares: Russell 2000 Index Fund.
ETFs are generally believed to reflect the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
The big redemptions from international stock ETFs slashed
total inflows into international stock funds to just $236.52
million, the least since late September 2012. Funds that hold
U.S. stocks, meanwhile, attracted $503.5 million overall, down
from $1.58 billion the prior week.
The benchmark S&P 500 rose just 0.3 percent over the
reporting period amid worries that Cyprus's 10 billion-euro ($13
billion) bailout deal with the European Union and International
Monetary Fund and its negative impact on bank bondholders and
large depositors could set a precedent for other cash-strapped
euro zone nations.
Those concerns, along with fears of a run on Cypriot banks,
kept markets quiet despite positive U.S. housing and
manufacturing data. The Dow Jones Industrial Average rose
a slight 0.1% over the reporting period after ending a
record-breaking rally that continued through March 14.
On Thursday, a day after Lipper's reporting period ended,
the S&P 500 gained 0.41 percent to reach a record closing high
of 1,569.18 amid upbeat data on U.S. economic growth and relief
that a run on Cypriot bank deposits failed to materialize.
The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the
week, including exchange-traded funds (in $ billions):
Sector Flow Chg % of Assets Count
($Bil) Assets ($Bln)
All Equity Funds 0.740 0.02 3,215.624 10,196
Domestic Equities 0.504 0.02 2,397.750 7,528
Non-Domestic Equities 0.237 0.03 817.874 2,668
All Taxable Bond Funds 3.848 0.24 1,580.743 4,885
All Money Market Funds 0.889 0.04 2,330.076 1,359
All Municipal Bond Funds -0.043 -0.01 326.078 1,384